Foreign Exchange Rate

  Inside the borders of a country, goods and services are traded with that nation’s currency. However, to trade goods and services with other countries, foreign currencies are needed. Foreign exchange rate is the amount of home currency units that are to be paid to obtain a single unit of a foreign currency. To put it simply, an exchange rate is the relative price of two currencies. In economic literature, there are two different concepts of foreign exchange rate. The main difference between these two concepts are the usuage of inflation in their structure. Nominal Exchange Rate refers to the...